Open Letter to the Municipal Securities Industry

In a New York Times article last Wednesday, Alexandra Lebenthal, President of Lebenthal & Company, reminisced about watching the World Trade Center being built when she was a young child. She said "My Dad thought it was very important for us to see what municipal bonds build. Bonds build infrastructure. That's what municipal bonds do." At this difficult time for America, municipal market participants should consider the important role that municipal bonds will play in the nation's physical and economic recovery from the recent terrorist attacks.

Municipal bonds will undoubtedly finance rebuilding the infrastructure of New York City's financial core. They will replace the many fire trucks, police cars and other state and local government assets lost on September 11th. Municipal bonds will provide the equipment and construction necessary for enhanced security at airports and other public sites across the country. Municipal bonds can and will accommodate the shifting priorities and different infrastructure needs awaiting us in this changed world.

The impact of the terrorists was not limited to New York City, Pennsylvania or the Washington, D.C. area. It has spread across the country as the adequacy of various revenue sources and cash flows pledged to support bond payments have been cast in doubt by the sudden decline in travel and other changes in the normal activities of Americans. The rumor mill is full of dire predictions about the creditworthiness of many bond issues and the financial futures of their issuers and borrowers. Frequently, the facts do not support such a negative outlook. The known can be dealt with. The unknown generates fear. Sharing good news and clarifying and quantifying the bad is in the best interest of issuers, conduit borrowers and the industry as a whole right now.

It is critical that we maintain a strong municipal bond market with the capacity to absorb the billions of dollars of new issues which will be needed for this country to respond to, and rebuild from, the disaster. It is often said that the municipal finance industry is based on trust. Maintaining that sense of trust depends on issuers, conduit borrowers and other market participants providing an ongoing flow of information to investors in good times and bad. It is essential that investors receive the information they need to maintain confidence in the workings of the municipal bond market.

This is a time for all market participants to step forward and support the integrity and strength of the municipal bond market. Issuers and conduit borrowers, wherever they may be, should go beyond the limits of disclosure mandated by law and voluntarily provide investors in both the primary and secondary markets with more timely and accurate material information. Increased disclosure will banish fear and support the trust that underlies the vitality of the municipal marketplace. America simply cannot afford for investors to lose confidence in the municipal market.